According to the officials of RBI, Cryptocurrencies can lead to “dollarisation” of a part of the economy which is against India’s sovereign interest, sources revealed.
The governor of the RBI and some other top officials, while briefing the Parliamentary Standing Committee on Finance, chaired by the ex minister of state for finance, Jayant Sinha, conveyed their concerns about cryptocurrencies and mentioned that they pose challenges to the strength of the financial system.
“It will seriously undermine the RBI’s capacity to determine monetary policy and regulate the monetary system of the country,” an RBI official said.
The officials said that cryptocurrencies have the potential to be a medium of exchange and take the place of the rupee in domestic as well as cross-border financial transactions.
Central bank officials stated that cryptocurrencies “can replace a part of monetary system it will also undermine the RBI’s capacity to regulate the flow of money in the system”.
They further went on to explain that besides being used for terror financing, drug trafficking, and money laundering, cryptos can also prove to be a threat to the stability of the financial system of India.
“Almost all cryptocurrencies are dollar-denominated and issued by foreign private entities, it may eventually lead to dollarization of a part of our economy which will be against the country’s sovereign interest,” the officials told the members.
Debating the impacts of cryptocurrency, central bank officials also said that it will have a negative impact on the banking system as they are attractive assets and hence people may invest their hard-earned savings in crypto which may result in banks having lesser resources to lend.
Moreover, the cryptos bubble will burst, in the long term, and it would result in the loss of hard-earned savings of the public, according to the RBI officials.
Earlier this year, the Union Budget was revealed and the Indian Parliament Passed Finance Bill Charging 30% Crypto Tax, which got mixed reactions from the general public.
